Hot Tomato's Seeks Bankruptcy Protection

Hot Tomato's Files For Protection

Hot Tomato's, a popular Union Place restaurant, has gone to bankruptcy court to hold creditors back as it comes up with a plan to pay more than $1 million in debts.

Owner John Guerriero and his lawyer said Tuesday the Chapter 11 filing last week by the parent Hot Tomato's Inc. would not affect the 120-seat restaurant's operations or its 78 employees.

"The restaurant is successful," said Guerriero, 40, who opened Hot Tomato's in downtown Hartford in 1981 and has invested in a string of restaurants in Connecticut and Massachusetts. "It's healthy. It's profitable."

However, he said, the slumping economy that this year drove such well-known Hartford restaurants as L'Americain and Hubbard's to close their doors has slowed Hot Tomato's sales to a level that it can no longer shoulder the full burden of paying its own suppliers and trade vendors as well as its parent company's debts.

Guerriero said filing Chapter 11 was the best way to keep certain creditors from damaging the restaurant's operations as they pursued repayment of their debts.

He blamed the corporation's fiscal woes on debt incurred four years ago to move to its current home in Union Place, skyrocketing taxes and a soured real estate investment.

Hot Tomato's, at the west end of Union Place opposite Bushnell Park, is the only Hartford restaurant affected by the parent's Chapter 11 filing. Guerriero said he recently sold a small stake in Hot Tamales, a Southwestern cuisine restaurant at the east end of Union Place.

In papers filed Friday in U.S. Bankruptcy Court in Hartford, Hot Tomato's Inc. listed $675,769 in total assets. It listed outstanding debts and obligations totaling $1.04 million, mostly among 20 largest unsecured creditors.

Two of those are loans with balances totaling about $441,000 owed to Fleet Bank and the federal receiver of failed Sentinel Bank, bankruptcy court papers show. Guerriero said the corporation borrowed the money to finance the restaurant's 1988 move from 309

Asylum St. to its present home at One Union Place.

In an interview, Guerriero blamed much of his company's financial problems on that move. He claimed Hartford developer David Chase approached him with a $600,000 offer to buy out his Asylum Street lease.

But Chase's offer, he said, collapsed after Hot Tomato's Inc. had borrowed $300,000 each from Sentinel and the then-United Bank & Trust (which later changed its name to Fleet Bank) to outfit a new restaurant in the renovated train station.

Chase was not in his office Tuesday and officials from his office could not be reached immediately for comment. Guerriero said that for two years revenues from Hot Tomato's paid the $11,000 monthly lease on the empty Asylum Street space, in addition to $15,000 a month for rent at Union Place.

The corporation eventually subleased the property for $4,000 a month to the Amarillo Grill, but revenues from Hot Tomato's made up the shortfall. Worse, he said, the revised tax assessment by the city of Hartford drove his share of the annual tax bill on the property up tenfold, from $4,000 to more than $40,000 -- money paid from the restaurant's coffers.

In addition, the company owes Connecticut National Bank the balance on $250,000 borrowed for a real estate investment that flopped.

Even with overall sales down during the slump, he said Hot Tomato's currently grosses about $200,000 a month. Gross profit ranges from 7 percent to 10 percent.

Whatever profit was left from the restaurant in recent years has gone to pay the outstanding loan and lease obligations of the corporation, he said. Guerriero estimates that during the past three years, the parent has tapped $500,000 of the restaurant's cash flow for loan and lease payments and property taxes.

"I cannot continue to carry two restaurant rents and all the baloney that goes along with it," Guerriero said. "Somebody's gonna have to take a shave and a haircut."

He said if the Chapter 11 bankruptcy does not resolve his financial problems he might file personal bankruptcy.

Court papers list fewer than 20 equity investors in Hot Tomato's Inc. But Robert DeFrino, Hot Tomato's bankruptcy attorney, said that aside from family trusts, Guerriero is the majority stockholder.

He said he approached both landlords, the two lenders and the federal receiver, the Federal Deposit Insurance Corp., offering roughly 30 cents on the dollar during a five-year period to settle the debts. They balked, he said.

In late August, Fleet Bank filed for an attachment on a $32,000 operating account that Hot Tomato's had with another bank, DeFrino said.

He said Fleet's action threatened the restaurant and prompted the decision to seek Chapter 11 protection to avoid further damage.

"The filing takes off some of the pressure and it allows us a less anxious atmosphere in which to continue and conduct the negotiations with these creditors," the attorney said.

"The present restaurant operation is healthy. It is more than capable of going forward and paying its own way."